Microsoft has announced it has cut 4,800 jobs — roughly 2.1% of its workforce — with Xbox bearing a large number of the latest layoffs. The sweeping cuts come as the tech giant restructures to focus on areas that can deliver for customers in a rapidly evolving industry, according to a memo from executive vice president Amy Coleman.
Layoff Details
According to the internal memo from Amy Coleman, the cuts are part of a "significant restructure" driven by changing customer needs. Coleman noted that while the company would not replace the lost roles with AI, "what is true is that AI is changing how work gets done." The layoffs represent roughly 2.1% of Microsoft's global workforce. The announcement comes at a time when the gaming industry is still recovering from brutal layoffs in recent years.
Xbox Restructuring
Asha Sharma, who recently took over as Xbox's chief executive, said in a note to staff that the division is "beginning the most significant restructure in Xbox history." More than 1,600 roles were immediately axed at Xbox, with another 1,600 jobs to be lost in the coming year, according to Sharma's note shared on X. Four Xbox game development studios — Compulsion Games, Double Fine Productions, Ninja Theory, and Undead Lab — will be spun off as part of the changes. Sharma added that Mojang (developer of Minecraft) and King (developer of Candy Crush) would now report directly to her.
"These changes are about a bigger future for Xbox, not a smaller one," Sharma said. "History is full of companies that mistake longevity for inevitability. We will not be one of them."
Industry Context
The layoffs add to a challenging period for Microsoft's gaming division. In 2024, Xbox culled more than 2,000 staff and shuttered four studios acquired prior to its bumper acquisition of Activision Blizzard. Little more than a year before these latest cuts, Microsoft had laid off as many as 9,000 workers after setting out plans to double down on its multi-billion-dollar AI spending. The spiralling costs of hardware have also prompted firms including Microsoft to hike prices of years-old consoles, with many blaming AI data centres for pushing up demand too quickly for supply to catch up.
| Timeline | Layoff Figures | Context |
|---|---|---|
| 2024 | 2,000+ jobs cut at Xbox | Studios shuttered after Activision acquisition |
| 2025 (prior) | 9,000 jobs cut company-wide | Doubling down on AI spending |
| 2026 (current) | 4,800 jobs cut (2.1%) | Xbox restructuring, 1,600 immediate + 1,600 phased |
Future Plans
Coleman pointed to the need for Microsoft to adapt: "Companies don't get to choose whether their industry changes; they only get to choose whether they change with it." Sharma acknowledged the cuts were "painful" but said a "reset" was needed across Xbox's entire content portfolio, platform, and operations. The restructuring aims to position Microsoft and Xbox for long-term growth amid industry-wide pressures from rising development costs, AI investments, and shifting consumer demand.
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